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Court sides with online firms in Fla. tax dispute

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Modified: February 28, 2013 at 3:18 pm •
Published: February 28, 2013

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TALLAHASSEE, Fla. (AP) — A divided three-judge panel sided with online travel companies such as Expedia and Travelocity on Thursday in a dispute over how much tax they must pay on hotel rooms booked in Florida.

A request for rehearing or an appeal to the Florida Supreme Court, though, is likely.

The 1st District Court of Appeal panel voted 2-1 that tourist development taxes are due only on what the firms pay to the hotels, not the full amount they charge their customers.

The majority affirmed a prior decision by Tallahassee-based Circuit Judge James Shelfer in a lawsuit filed by 17 of Florida's 67 counties.

The counties argued the online firms also should be taxed on the markup they charge their customers — amounts that run into the millions statewide and nationally. Such cases also have come up in other states with similar laws and in federal courts.

The online companies contend the markup should not be taxed because it pays for their services rather than hotel rent.

Robert Nabors, a lawyer for the counties, said his clients were still considering their options including a rehearing, possibly by the full 15-member district court, or a Supreme Court appeal.

"This is the kind of case that ultimately has to be decided by a crowd bigger than three or two," Nabors said.

While the case was narrowly decided, a lawyer for the online companies said it was in line with the majority of court decisions across the country.

"It's now 20-plus — 22 or 23 — in favor of the online travel companies," said Darrell Hieber. "In that sense, it's been a landslide."

The circuit judge had ruled that state law is unclear on the issue and Florida Supreme Court has said such ambiguity must be resolved in favor of the taxpayer rather than the government.

"As the trial court here correctly determined, it is for the Legislature, and not the judiciary, to decide whether to apply the tax to the full amount that the companies charge their customers," wrote District Judge Bradford Thomas, a former legislative staffer.

Thomas noted that in recent years several bills have been introduced in the Legislature to either expressly include or exclude taxation of the markup, but none have passed. Such legislation has not been filed so far this year.